How Fintechs Turn Simple What Financial Institutions Overcomplicate


One of the key questions of investing is, naturally, what exactly to invest in. Before starting, every single one of us needs to stop and think about how to make the most of the extraordinary times we live in. Fintechs are revolutionizing the financial industry and opening opportunities to individual savers that traditional Financial Institutions simply didn’t allow before. But the rules to invest remain the same. Let’s check how companies such as Iban Wallet help small savers to realize that in investing, simplicity is the key.

Among my personal financial heroes, John C. Bogle, founder of the Vanguard Group and creator of the index mutual fund, is the single handedly the person with the biggest impact on individual investors results in history. He died at the beginning of 2019, but his lessons for investing are simple elegance, and deeply valuable for any type of investor.

“Simplicity is the master key to financial success. When there are multiple solutions to a problem, choose the simplest one.” — Investing with Simplicity, John Bogle

His investment philosophy can be summarized in 4 simple steps:

  1. Define clear goals;
  2. Invest in what you understand;
  3. Develop a workable plan and stay disciplined;
  4. Minimize costs.

Investing your money requires as much common sense as knowledge about the various asset classes, how they work and how to best invest in them. Fintech saving and investing platforms, such as Iban Wallet, can be the ideal starting point for any individual looking to define investment principles and set up the right procedures towards financial wealth.  

Define clear goals:

Before investing, create clear goals with appropriate time allocations. You need to know the reason why you want to start saving. Take the time to define your personal goals and keep in mind that your investment objectives should be measurable and attainable based on your current personal/family budget. Your success cannot depend upon outsize investment returns, nor upon impractical savings or spending habits.

For that, have realistic expectations. You are unlikely to get rich quickly. Define your personal goals and allocate your savings accordingly. Once you define them, it will be much easier to establish a regular savings pattern. These savings habits should be directly aligned with your goals of accumulating financial wealth. How much savings is enough? That depends on your discipline. Every month spend a little and save a little. Financial discipline in your life is a great way to master your money. With clear goals, you avoid erratic savings behavior, unplanned expenditures or buying products and services that will derail your planned cash flow and your financial schedule.

Iban Wallet makes easy for you to allocate your savings based on particular timelines, offering returns based on time commitment and providing the possibility to earn fixed daily interest paid on a daily basis. Each account has a different targeted interest rate with pre-defined term limits that could be aligned with your goals: immediate liquidity, one, three and 5 years. A simple and transparent offer that helps you understand that time is critical. With time, you can harness the power of compounding and see your money potentially grow faster.

Invest in what you understand:

There’s no escaping risk. Every single investor is in search of high returns without risk. Despite many claims that such investment exists, I don’t know anyone that has found it. Also, keeping your money in the traditional bank savings account may be riskier than you think, because it will likely lag inflation.

You should invest in line with your risk profile. How much risk you can take is an essential ingredient of common sense investing. Know yourself well financially.

One of the easiest ways to start investing is doing so in asset classes you understand. You do not need to get caught in the myriad of the stock market if it is something you don’t know how it works!

Are you familiar with how lending works? What does it take to get money? More money. When you borrow, you have to pay back the amount you borrowed plus interest after the time frame agreed between the two parties. You may also have to pay fees. You have this knowledge based on your experience with traditional Financial Institutions being the lenders. But, why can’t you become yourself a lender and enjoy the rewards of such an easy to understand model?

Iban Wallet is among the group of fintechs that are democratizing access to individual investors to earn money from lending their savings. Iban Wallet offers you an easy option to apply your savings to finance loans and receive the principle plus interest without the need to overcomplicate procedures or select the loans yourself. Iban Wallet works as an intermediary to the lending process, providing the technology for all parts involved, aggregating many loans together, thus making it easier and much simpler for you to manage risk through diversification in a single easy to understand investment account.

Develop a workable plan and stay disciplined:

Once you define clear goals and know where to invest, it is time now to develop a suitable plan to create a true investment portfolio. A common sense investment strategy starts by building an asset allocation suitable for the portfolio's objective, but even before that, starts with a clear assessment of your financial reality:

  1. Pay your debts before allocating resources to investment. Close any personal loans that you may have that represent a liability on your personal finances;
  2. Have an emergency fund. Investing with common sense requires the creation of an emergency fund capable of providing all mandatory living expenses for a period of 6 months. These funds should be kept in a liquid instrument that you can use in case of emergencies. Emergencies can come in the form of job losses or sudden health issues. You need to be prepared with cash for everyday living expenses like rent, groceries or medicines without the need to trade your investment portfolio;
  3. Define your investment allocation based on your savings and objectives. Your investment allocation should be built upon reasonable expectations for risk and returns, and should use diversified investments to avoid exposure to unnecessary risks, always maintaining common sense perspective and long-term discipline.
  4. Be disciplined and avoid the noise. Once you have a clear workable plan, keep it on track and stay disciplined. Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralyzed, unable to implement a common sense investment strategy. Discipline and perspective are the differentiating qualities that can help investors remain committed to their long-term investment plans through periods of market uncertainty.

You can’t know the future, but you need to define your plan and stick to it! Remember that the enemy of a good plan is the search for a perfect plan. Make assumptions, and then change them when you get better ideas or better information. Putting your personal plan in writing will help you maintain the necessary discipline to “stay the course”.

By combining projected daily interest payments with immediate liquidity, an Iban Wallet account is a great option to allocate part of your investment portfolio and earn interest from it. You can deposit and request withdrawals when you need by using your mobile in any part of the world.

Minimize costs:

Minimize cost, bank fees, transaction commissions and any other type of cost that undermines your investments. Markets are unpredictable. Costs are forever. The lower your costs, the greater your share of an investment's return. Even a very small commission or transaction fee multiplied across your entire investment career can cost you an incredible amount.

Banks charge you for what you don’t need. And traditional financial institutions charge too much for their artful, complicated investment advice. Common sense investing tells you to avoid such costs and we now live in a moment where for the first time in history, you as an investor can choose to work with Fintech solutions that have built their entire business model to protect savers turned investors by offering free of charge investment vehicles.

“In investing, you get what you don’t pay for. Costs matter." — Investing with Simplicity, John Bogle

Iban Wallet offers its simple investment accounts without any fees for individual investors, allowing them to maximize returns and see the true impact of compounding on their investments.

In a financial market with banks and other traditional financial institutions thriving from the lack of knowledge of individual investors to increase costs and commissions, fintechs such as Iban Wallet are giving decision power back to investors to allow them to decide what is best, based on their personal goals and common sense investment approach. It is now in the hands of the individual investor to take ownership of their personal finances and take full advantage of the fintech revolution that allows simple, clear to understand and free of charge investments for a balanced and profitable portfolio.

Are any other common sense investing rules you believe should be highlighted? Reach me following the information presented below.

About the Author: Carlos Boto is the blogger behind Savings4Freedom. He’s entrepreneur, and a professor of Management and Entrepreneurship.